Good Intentions: The Honest But Unfortunate Debtor

Every two years Licensed Insolvency firm Hoyes, Michalos & Associates Inc. publishes a study on the average insolvent person in Ontario. Their study highlights vulnerable groups who are more prone to becoming insolvent, and identifies potential causes of insolvency.

Who’s More Likely to File Insolvency?

The study states that millennials, seniors, and single parents have an increasing number of people filing insolvency. Millennials have the highest proportionate usage of payday loans, are struggling with student debt, and don’t have good job security.

Seniors are the fastest growing risk group, and it’s mainly because they’ve carried debt into retirement. Seniors are struggling to make debt payments when coupled with rising cost of living and a fixed income. They often drain their retirement savings to repay their debt, when most of it would be safe if they dealt with a Licensed Insolvency Trustee.

Of the single parents who filed insolvency within the study, 75% of them were women. They have more student debt than the average insolvent debtor, and have limited savings.

The Unfortunate Debtor in Ontario

It’s important to set a budget, but it’s only as effective as its execution. Many people fall into the cycle of debt because their expenses are simply more than their income, and their solution is to use debt to make ends meet. Depending on your credit, many of these options come with high interest rates, which means you’re primarily making payments on interest, and not on your principal loan. The key takeaway from the Hoyes Michalos study is this:

he isn’t using credit to live beyond his means – he’s using debt to make ends meet.

Cut back on any expense that isn’t a necessity, try and find ways to reduce your cost of living, and always put as much money as you can towards your high interest debts first. There are many free tools you can use, like our debt reduction calculator, to help you determine which path out of debt works best for you.